Lawsuit: Madoff sons knew of fraud, deleted emails

NEW YORK (AP) -- The trustee trying to recover money for victims of Bernard Madoff says in a new lawsuit that Madoff's two sons knew of the Ponzi scheme and sought to cover up the fraud by deleting emails during a Securities and Exchange Commission probe.

The lawsuit filed Tuesday seeks to recover $153 million from the brothers for using their father's business as a "personal cookie jar," including millions to buy two apartments in Manhattan. The lawsuit says the money came in the form of sham loans and fictitious trades and deferred compensation.

The lawsuit names Andrew Madoff and the estate of his elder brother, Mark Madoff and Mark's widow Stephanie Mack. Mark committed suicide in December 2010.

"The new allegations are unfounded and false," said Martin Flumenbaum, a lawyer who represents Andrew and Mark's estate. "As we stated from the outset, neither Andrew nor Mark knew of, or knowingly participated, in their father's criminal conduct. It was Andrew and Mark who informed the authorities of their father's fraud, and put an end to it."

The lawsuit relies partly on testimony of Frank DiPascali, Madoff's former finance chief who pleaded guilty and agreed to cooperate with federal prosecutors. The suit says that DiPascali testified that he worked with two Madoff brothers, among other employees, to delete emails that they did not want the SEC to review.

Bernard Madoff was arrested in December 2008 after he ran out of money. He pleaded guilty and is now serving 150-year prison sentence.

At the time he said he acted alone, but since then juries have decided otherwise. In March, five former top Madoff employees were convicted of helping in the Ponzi scheme.

Madoff clients lost nearly $20 billion. A court-appointed trustee, Irving Picard, has recovered much of the money by forcing those customers who received big payouts from Madoff to return them. When the fraud was revealed, Madoff admitted that the nearly $68 billion he claimed existed in accounts was only a few hundred million dollars.